Thursday, June 26, 2008

Kevin's Blog

I like the the photo of Kevin Podmore on his blog but am confused as to why there is no mention that the company was going to collapse less than one month after this relatively upbeat commentary.

The blog is 2 months old.

Kevin and his directors would have known the company was facing difficulties but just like other finance companies that have collapsed, St Laurence continued to borrow money from investors.

But it’s also good to see that even in the current environment where lending hasn’t prospered investors have benefited overall from the diversified business model that St Laurence has. Losses from the lending business have been more than offset in other areas and as a consequence our profit is just $2.1 million less than last year. We think its not a bad result.

Investors have benefited overall from diversification?

Kevin, come on! you knew this wasn't truthful when you wrote it didn't you?

What allowed to to risk investors money by continuing to borrow their money while all along knowing they were not going to get it back?

Was it greed, embarrassment, shame, what?

Be honest Kevin Podmore, why didnt you give investors in St Laurence fair warning months ago that their money was at risk?

That warning should have been on your blog somewhere.

I couldn't find it.

c Share Investor 2008


NZ Herald Feature:

Finance companies in freefall


Kevin Podmore.

22 May

Posted by Kevin at 10:10 am

We have just released our year end results and investors will have noticed a few changes this year. As well as increased underlying earnings, the main difference is the increase in loan provisioning.

In simple terms, a loan provision is an expense set aside as an allowance for doubtful loans in cases where the amount owed may not be fully collectable and/or delayed. Under the new NZ IFRS accounting standards, ‘general’ provisioning (of a set percentage of the loan book) has now been replaced with ‘specific’ provisioning against individual loans that are impaired.

IFRS requires a discounted cash flow (DCF) methodology for provisioning, a more accurate measure I believe which requires companies to assess the level and timing of future payments (both principal and interest) and discount those payments into today’s dollars.

I’d like to emphasise though that provisioning is not a write-off of the loan; it is an allowance against a company’s future ability to collect that loan in its entirety. Provisioning impacts on the current year’s profit rather than delaying the impact to future years’ earnings, but it also means that the closer the loan gets to its collection date, there is a recovery of the discounted value of that money.

Higher levels of provisioning shouldn’t be a surprise given the tighter market conditions - the banks have included billions of dollars of provisions in their recently announced results. As turmoil in global markets and the slowing of the US economy plays out, and the New Zealand economy slows due to tighter monetary policy and credit conditions, we are seeing a change in the credit cycle and I think our approach with regards to provisioning will stand us in good stead going forward.

But it’s also good to see that even in the current environment where lending hasn’t prospered investors have benefited overall from the diversified business model that St Laurence has. Losses from the lending business have been more than offset in other areas and as a consequence our profit is just $2.1 million less than last year. We think its not a bad result.


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